Author Topic: Where to park cash?  (Read 1406 times)

coldsteel333

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Where to park cash?
« on: March 04, 2019, 05:13:25 PM »
So I posted on another part of this forum about attacking some debt and getting it paid down over the next few years. Many roasted me for the financial decisions Iíve made. So with long thought Iím going to be selling my home and moving states.  Iím going to be renting a home for the next few years hoping for the housing market to correct some. During that time Iím going to be increasing my contribution to retirement accounts as well as saving some money so that I can purchase a home out right cash.  My question is I will have about $120,000 in equity that I would like to be able to park in a zero risk asset that would hopefully cover any potential increase in the housing market prices.  And doing my market analysis I think the consensus is a 2.7 to 2.9 increase in housing prices over the next year so something that would yield close to that or better but without the risk of equity-based investments. And if it all possible preferably something liquid. Thanks in advance for your replies

PDXTabs

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Re: Where to park cash?
« Reply #1 on: March 04, 2019, 05:45:37 PM »
And doing my market analysis I think the consensus is a 2.7 to 2.9 increase in housing prices over the next year so something that would yield close to that or better but without the risk of equity-based investments. And if it all possible preferably something liquid. Thanks in advance for your replies

CIT Bank has a 2.45% APY savings account right now. I think that would be a great place to park a down payment for 12 months.


Radagast

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Re: Where to park cash?
« Reply #2 on: March 04, 2019, 08:31:42 PM »
https://www.doctorofcredit.com/high-interest-savings-to-get/
https://investor.vanguard.com/mutual-funds/list?filterAllAssetClasses=false&filterMoneyMarket=true&filterFiftyThousandAndUp=true&filterLowCostInvestor=true#/mutual-funds/asset-class/month-end-returns

^ compare the after-tax yields in those links to see if there is anything that meets your goal. Municipal money market funds are free from federal taxes, municipal money market funds in your state are immune to both federal and your state taxes, and Treasury money markets are immune to state taxes, to make things fun for you. Bank accounts, CDs, and other money markets are fully taxable. If that doesn't seem like enough return then you need to take some risk. Check out

https://investor.vanguard.com/mutual-funds/list?assetclass=bond#/mutual-funds/asset-class/month-end-returns
https://investor.vanguard.com/mutual-funds/list?assetclass=bal#/mutual-funds/asset-class/month-end-returns

I am in a similar situation. We are in a long term search for a house, but not so much in the next year or two. On the one hand, taking low risk seems desirable. But then, a considerable risk to the plan is that houses continue to appreciate at 5% annually for a decade, or else we decide not to buy a house and end up with years of low returns which derails other plans. For those reasons I think some stock exposure is warranted, we were at 100% a few months ago but will be putting an increasing amount into safer things.

CanuckExpat

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Re: Where to park cash?
« Reply #3 on: March 04, 2019, 10:44:46 PM »
How do you define zero risk? FDIC secured is good enough? Can you do with asset backed? Zero risk can have many definitions.

Barring that, here is a hopefully helpful link: Best Interest Rates on Cash Ė March 2019

i_have_so_much_to_learn

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Re: Where to park cash?
« Reply #4 on: March 04, 2019, 10:55:24 PM »
My question is I will have about $120,000 in equity that I would like to be able to park in a zero risk asset that would hopefully cover any potential increase in the housing market prices.

It sounds like your only options are to use cash accounts. FDIC insurance is the closest thing you'll get to 0 risk, which insures each account up to 250,000. Ally Bank online is pretty liquid and allows you to ear something like 2.2% annually right now. Feel free to look into short-term CDs but the interest rates are all trash right now.

Why do you need the cash to be pretty liquid? What is the reasoning here?

The reason I ask is because w/o reading your other threads or understanding the background, you are missing out on opportunity cost. You should try to have *some* exposure, even if its not great, because it gives you the ability to make (and lose) money when the market moves. Investing something like 10-20% of your account into a lower-risk portfolio (i.e. something like wealthfront on the lowest risk setting), or an index fund, does expose you, but only 10-20% of your net worth, and if you can handle waiting, it will often come back.

MustacheAndaHalf

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Re: Where to park cash?
« Reply #5 on: March 05, 2019, 10:28:19 AM »
Iím going to be renting a home for the next few years hoping for the housing market to correct some. During that time Iím going to be increasing my contribution to retirement accounts as well as saving some money so that I can purchase a home out right cash.
If you can't afford the house 3 years from now, what do you plan to do?  If you need a house and don't have flexibility, yes you need the down payment to be safe.  If you can be flexible on the timing - delay 1-2 years if the stock market corrects - then you could invest some of the money in stocks, some in bonds.

TFT

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Re: Where to park cash?
« Reply #6 on: March 05, 2019, 08:52:49 PM »
VARO bank is offering 2.8% on savings as long as you have have less than $50K in it. If you combine that with a CIT savings you'll be earning a blended ~2.5% which is pretty good. You'll still have liquidity as well.

Varo:https://www.varomoney.com/
CIT: https://www.cit.com/cit-bank/tiered-savings-account-savings-builder-direct/